The maestro and the meltdown

In 2000, The Washington Post’s Bob Woodward published a biography of the chairman of the Federal Reserve Board entitled “Maestro,” with the cover image portraying Greenspan in full oracle mode: testifying before Congress, hands gesturing like a professor explaining some complexity to struggling students.

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The cover line conveyed the message: “Greenspan’s Fed and the American Boom.”

But by 2009, the confidence, the gesticulations and the aura were all gone, replaced in the public mind now by a computer generated image in Time magazine of Greenspan posed as if in a police mug shot, hands resting meekly at his side and head hanging slightly.

It was with the two Greenspan images — the maestro and the mug shot — as bookends to his lengthy Washington career that the 82-year old Greenspan took to the stage before the Economic Club of New York Tuesday night to explain himself and the global economy to an increasingly skeptical world.

But if the economic and Wall Street luminaries who crowded the Grand Ballroom of the New York Hilton came to hear a mea culpa, they left sorely disappointed.

Greenspan spoke softly, arms spread wide at the lectern, head down so he could read his speech, and rarely offered any insight into his own role in the global financial disaster.

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After his prepared remarks, Greenspan took a question from Jacob Frenkel, the former Israeli central banker and vice chairman of the insurance giant American International Group, which was bailed out last year by the federal taxpayers to the tune of more than $100 billion.

With the benefit of hindsight, Frenkel wanted to know, what were the decisions that should have been made to prevent the calamity?

The question was a perfect launching pad for an admission of some degree of personal responsibility. But Greenspan didn’t go there. Instead, he said it was the very success of the Federal Reserve — largely under his tenure — that created the opportunities for “asset bubbles,” like the ones in technology stocks and the housing market. The very effort of creating “balance in the economy,” he said, creates “periods of euphoria.”

“Is there a way to suppress that? I’m not sure,” Greenspan continued. “There has never been, to my knowledge, any historical evidence that that has happened.”

Greenspan has plenty of company in the legacy management business these days.

President Bill Clinton, who reappointed Greenspan to the Federal Reserve shortly after his election in 1992, has gone on something of a PR offensive of his own recently, deflecting questions about his own blame for the economic crisis.

Clinton acknowledged on CNN that he could have put in place more stringent regulation of some of the exotic derivatives that are at the heart of the financial crisis. But he told NBC that he doesn’t belong in the No. 13 slot on Time’s list of people to blame for the meltdown.

“Do any of them seriously believe if I had been president, and my economic team had been in place the last eight years, that this would be happening today?” Clinton asked. “I think they know the answer to that: No.”

Another luminary badly tarnished by the market meltdown has been Clinton’s former Treasury secretary, Robert Rubin. He’s been blamed for pushing deregulation — and particularly for blocking efforts to regulate the exotic derivatives market, which became a key component of the market wipe out. And his post-government career has seen a humbling ebb.